This article first appeared in Campaign Asia. Read the full version here.

As the world battles with economic headwinds and inflation, direct-to-consumer startups and media groups are on the lookout for alternative streams of revenue or business models to increase ad spending and grow revenue.  

One alternative business model is 'media for equity' (M4E), where startups trade equity to media conglomerates for advertising space. This model gained popularity in Europe in the 1990s, where one of the very first funds was SevenVentures, a media investor and the investment arm of ProSiebenSat.1 Media SE, whom saw an opportunity to use the unused inventory they had on television to diversify their revenue.

In Asia Pacific, The Times of India Group started making such investments through Brand Capital, its strategic investment division, in 2005. In the last two decades, they have made nearly 1000 such investments, of which 900 were in India.

These investments were in Indian-based startups looking to expand and companies outside of India targeting this market. They have also invested in startups in the UK, Nordics and Singapore.

This model is growing in other parts of APAC, including Southeast Asia, where established media groups like Media Prima Berhad have made these investments previously. Hasnain Babrawala, founder and chief executive officer of Fame Media Global, believes M4E creates a win-win ecosystem for all stakeholders, media partners, investors, and startups.

He explains startups turn to M4E when the growth of the company and the industry in which they operate are correlated and when they want to improve their return on equity and return on ad spend. In addition, startups can use their cash to build a more robust business infrastructure to meet the growth through marketing.

For media partners, it is a vehicle to diversify their revenue, create a new pool of advertisers for the future, be part owners of high-growth startups, monetise their inventory, and be prepared for uncertain economic tailwinds. For the investors, the M4E model reduces risk exposure, adds value beyond just "cash," and contributes to the venture build.

There are a handful of players in this space; while this model is prominent in Europe and India, in SEA, it is at a nascent stage of growth; we are sure this equation will change in the next decade when we will have more second and third generation entrepreneurs who would recognise the need for value towards venture building versus only cash," Babrawala explains.

I foresee M4E as a win-win model that will be adopted as the desired standard in the fundraising process and increase co-investment participation. It helps the investors reduce risk profiles, add value beyond cash, drive accelerated growth, and hedge against uncertainties.

Diana Florescu, chief executive officer and founder at mediaforgrowth, explains the M4E model can be a direct investment from a media group, or it could be from an independent fund which aggregates multiple mediums such as TV and outdoor radio.

For example, media companies like Media Prima can directly invest in a startup or an independent fund like the German Media Pool in Germany, which will work with different media groups, aggregate the inventory and act as a broker between the TV stations, media groups and startups.

This is similar to what you see as a corporate venture capital fund. Sometimes they invest off the balance sheet or have a fund separately, Florescu adds.

For startups looking to raise M4E in APAC, Babrawala notes in SEA that word of mouth plays a critical role in the purchasing decision. He says M4E companies look at and also advise startups to ask four vital questions:

1. Have you captured at least 5% of the market share in your category? Having a critical mass of customers would enhance the impact of mass media and generate word of mouth.  
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2. Is your CAC stable or increasing for three consecutive months? An increasing CAC means saturation of performance marketing dollars, and the introduction of mass media at that stage will help the brand build credibility and accelerate its KPIs, whether it is adoption/usage/LTV/revenue goals.
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3. Does the brand have optimum online engagement and a decent following on social media channels? If yes, it is time to go live on mass media channels.  
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4. Does the offer's product or service require education, habit formation, or change? That would require a much more significant investment in media to influence that change. Since the media dollars are equivalent to shares, it is a decision for founders to evaluate.

 The investment needed in media depends on the brand life cycle, the category, and the roadmap, among others. Hence, it is advisable to consider doing an M4E deal to keep these elements in mind and structure the investment, which would deliver results and not bragging rights of your brand advertising on TV or OOH, he explains.

 Once we have agreed to move forward and depending on whether we are co-investing with another VC fund that is putting in cash or we are investing by ourselves, we go ahead with the due diligence process, where we work closely with the management and growth teams to understand the business goals and roadmap. The CMO has to align expectations from mass media and its channel choices.